Salaries Speak Louder than Words: The Ninth Circuit Holds that Prior Salary Cannot Justify Wage Disparities

Katherine M. Flett

By Katherine M. Flett

equal pay dayIn April 2018, the Ninth Circuit Court of Appeals held in Rizo v. Yovino that an employee’s pay history is not a legal justification for a wage disparity under the Equal Pay Act.

The Equal Pay Act (the “Act”) stands for a principle as simple as its title: men and women should receive equal pay for equal work, regardless of sex.  While sex-based wage discrimination has been prohibited under the Act for over fifty years, the pay gap between men and women continues to be a disconcerting reality in our society.

The Act provides that an employer may justify wage disparities if it is able to prove that it relied not on sex, but on one of the following exceptions: (i) a seniority system; (ii) a merit system; (iii) a system that measures earnings by quantity or quality of production; or (iv) a differential based on “any factor other than sex.” It is the last “catch-all” exception that was the subject of Rizo v. Yovino.

Aileen Rizo was hired as a math consultant by the Fresno County Office of Education (“Fresno”), after previous employment as a middle and high school math teacher.  Fresno’s policy to determine a new employee’s salary was to add five-percent to any newly-hired employee’s previous salary and then place the employee within the corresponding salary scale.  After learning that her male coworkers were placed into higher salary scales than she was upon hire, Rizo sued her employer for violating the federal Equal Pay Act, among other claims.

Fresno argued that considering Rizo’s prior salary was a permissible “factor other than sex” under the Act.  The trial court rejected Fresno’s arguments, and Fresno appealed to the Ninth Circuit.  A three-judge panel reversed the trial court decision, relying on a Kouba v. Allstate Ins. Co., a Ninth Circuit case from 1982, that held that it was permissible for an employer to rely on an employee’s prior salary as a “factor other than sex.”  Rizo requested a rehearing before a full (en banc) panel, which the Court granted.

The en banc panel rejected Fresno’s argument, overruled Kouba, and held that a “factor other than sex” must be “job-related” and not one that affects a “business policy.”  The Court specifically noted that “to allow employers to capitalize on the persistence of the wage gap and perpetuate that gap ad infinitum—would be contrary to the text and history of the Equal Pay Act and would vitiate the very purpose for which the Act stands.”

Instead, the Court held the “any factor other than sex” exception must be “limited to legitimate, job-related factors such as a prospective employee’s experience, educational background, ability, or prior job performance.”

The Ninth Circuit (which includes Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington) is the now the only federal court of appeals to hold that salary history may never be used to set initial salaries.  Slightly different, the Tenth and Eleventh Circuits (which include Colorado, Kansas, New Mexico, Oklahoma, Utah, Wyoming, Alabama, Florida, and Georgia) have held that prior salary history alone may not justify wage disparities between men and women.  The Eighth Circuit (which includes Arkansas, Iowa, Minnesota, Missouri, Nebraska, and South Dakota) has held that employers may rely on prior pay as an affirmative defense, but only upon a showing that the prior pay itself was not the result of discrimination or sex stereotyping.  In sharp contrast is the Seventh Circuit (including Illinois, Indiana, and Wisconsin), which is the sole federal court of appeals to hold that salary history is always a “factor other than sex,” permissible under the Act.

This split among circuits renders this question ripe for review by the U.S. Supreme Court.  In fact, Fresno publicly announced that it intends to appeal to the U.S. Supreme Court.

Additionally, several states, including California, Delaware, Massachusetts, New Jersey, New York, Oregon, and Washington, have enacted state laws that prohibit employers from relying upon prior pay as a defense to a pay discrimination claim in state cases and/or from inquiring about prior pay at all during the application process.

We encourage all employers to take a critical look at their current pay policies and contact one of Danna McKitrick’s experienced employment lawyers with any questions regarding compliance with applicable equal pay laws.

Click here to read the Rizo opinion in its entirety.

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Posted by Attorney Katherine M. Flett. Flett is a member of the litigation team focusing on assisting clients with matters relating to business, civil and commercial litigation.

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